THE  UNIVERSITY 

OF  ILLINOIS 

LIBRARY 

630.7 
II6b 


A6RIGULTURAL 
UlftABY 


' 


UNIVERSITY  OF  ILLINOIS 

Agricultural  Experiment  Station 


BULLETIN  NO.  224 


THE  SEASONAL  COST  OF  MILK  PRODUCTION 

BY  F.  A.  PEAESON 


URBANA,   ILLINOIS,   DECEMBEE,   1919 


SUMMARY  OF  BULLETIN  No.  224 

INTRODUCTION. — The  present  study  is  concentrated  upon  the  seasonal  varia- 
tions in  the  cost  of  milk  production  and  not  upon  the  method  of  calculation. 

Page  3 

SOURCE  OF  DATA. — The  data  presented  in  this  bulletin  were  secured  from 
cost-accounting  records  kept  on  dairy  farms  located  in  the  dairy  district  tribu- 
tary to  Chicago.  Page  3 

HERD  COST  OF  MILK  PRODUCTION  BY  MONTHS. — With  the  herd  as  the  basis 
of  computation,  the  monthly  cost  of  producing  one  hundred  pounds  of  milk  varied 
from  $.94  in  June  to  $2.14  in  December  (1914-15  prices).  Approximately  three 
times  as  much  hay  and  grain  were  fed  per  hundredweight  of  milk  produced  during 
the  winter  months  as  during  the  summer  months.  The  average  feed  expense  per 
hundredweight  of  milk  was  nearly  twice  as  great  during  the  winter  months  as 
during  the  summer  months.  The  amount  of  labor  used,  per  hundredweight  of 
milk,  was  35  percent  greater  during  the  winter  months  than  during  the  summer 
months.  Page  4 

By  applying  current  prices  to  the  amounts  of  feed  (other  than  pasture)  and 
labor  shown  to  have  been  used  in  producing  one  hundred  pounds  of  milk,  and  multi- 
plying the  result  by  the  percentage  which  feed  and  labor  are  shown  to  have  con- 
stituted of  the  total  net  cost,  the  approximate  cost  of  milk  production  may  be 
ascertained  for  any  month  or  season  of  the  year.  Page  10 

SIGNIFICANCE  OF  SEASONAL  VARIATIONS  IN  FEED  AND  LABOR  EXPENSE. — It  is 
clear  that  pasture  is  the  important  factor  in  reducing  the  cost  of  milk  produc- 
tion during  the  summer  months.  Pasture  reduces  the  amount  of  labor  spent  on 
the  herd  and  permits  more  time  to  be  spent  with  the  crops  during  a  period  when 
the  returns  from  labor  spent  on  crops  are  relatively  large  compared  with  returns 
from  the  herd.  Page  11 

Cow  COST  OF  MILK  PRODUCTION  BY  MONTHS. — With  the  cow  as  the  basis  of 
calculation,  the  net  cost  of  producing  one  hundred  pounds  of  milk  varied  from 
$1.15  in  June  to  $2.08  in  December  and  February  (1914-15  prices).  Page  12 

SEASONAL  VARIATION  IN  COST  OF  PRODUCTION  AND  PRICE  OF  MILK. — In  gen- 
eral, the  monthly  variation  in  the  price  paid  for  milk  at  the  Chicago  market  has 
followed  the  relative  fluctuations  in  the  cost  of  production.  Page  16 

CONCLUSIONS  Page  18 


THE  SEASONAL  COST  OF  MILK  PRODUCTION 

BY  F.  A.  PEARSON,  ASSISTANT  CHIEF  IN  DAIRY  HUSBANDRY 

INTRODUCTION 

The  present  study  pertains  to  the  seasonal  cost  of  producing  milk 
for  direct  consumption.  Numerous  organizations  in  various  parts  of 
the  United  States  have  made  from  time  to  time  many  studies  of  the 
cost  of  milk  production,  but  in  most  instances  these  data  involve  what 
is  known  as  the  year  cost  of  milk  production.  Little  or  no  attention 
has  been  given  to  the  seasonal  variations  in  the  cost  of  producing  this 
important  commodity. 

The  question  of  seasonal  variations  in  the  cost  of  fat  production 
was  discussed  briefly  in  1914  before  the  American  Farm  Management 
Association  and  later  the  proceedings  were  published  by  the  asso- 
ciation.1 The  present  study  presents  quantitative  results  which  set 
forth  in  rather  precise  form  the  large  variation  in  the  cost  of  pro- 
ducing milk  for  urban  consumption  in  the  different  months  of  the  year. 

SOURCE  OF  DATA 

The  Department  of  Dairy  Husbandry  has  been  carrying  on  de- 
tailed cost-accounting  investigations  pertaining  to  various  problems 
of  dairy  farm  administration  since  1912.  The  data  presented  in  this 
bulletin  involve  eighteen  of  the  thirty-six  farms  included  in  the 
study  of  the  year  cost  of  milk  production  published  as  Bulletin  216 
of  this  station.2 

The  eighteen  herds  under  consideration  were  located  in  the  whole- 
milk  district  tributary  to  Chicago.  The  data  were  secured  during  the 
fiscal  years  1914-15  and  1915-16  before  the  war  had  produced  any 
marked  increase  in  the  general  price  level.  The  data  for  herd  cost 
involve  407  cows,  19  bulls,  and  234  young  stock.3  The  cows  produced 
for  sale  in  the  period  under  consideration  2,733,735  pounds  of  milk 
testing  3.47  percent  of  butter  fat,  or  94,87Q  pounds — an  average  of 
6,717  pounds  of  milk  and  233  pounds  of  fat  per  cow.  Fifty-seven 
percent  of  the  milk  was  produced  in  the  six  winter  months.  During 
the  winter  months  the  407  cows  dropped  138  living  calves,  and  dur- 


'Proceedings  of  Fifth  Annual  Meeting  of  the  American  Farm  Management 
Association,  page  41.  1914. 

2Pearson,  F.  A.  The  Cost  of  Milk  Production  Computed  on  the  Year  Basis. 
24  pp.,  1919. 

3In  Bulletin  216  the  figures  showing  young  stock  represent  cattle  units,  two 
young  stock  being  considered  one  unit,  while  in  the  present  study  the  figures 
icpresent  individuals.  This  occasions  a  discrepancy  in  the  two  sets  of  figures. 


4  BULLETIN  No.  224  [December, 

ing  the  summer  six  months,  219.  Of  the  219  cows  freshening  in 
the  summer  six  months,  149  freshened  in  September  and  October 
and  are  considered  fall-freshening  cows.  During  January,  35  living 
calves  were  dropped;  February,  15;  March,  12;  April,  11;  May,  23; 
June,  8 ;  July,  17 ;  August,  22 ;  September,  70 ;  October,  79 ;  Novem- 
ber, 40;  and  December,  25. 

The  data  for  cow  cost  involve  the  same  farms  as  the  data  for  herd 
cost,  but  not  the  same  quantities  of  milk  and  fat,  as  a  small  amount 
was  fed  to  the  young  stock. 

HERD  COST  OF  MILK  PRODUCTION  BY  MONTHS 

Briefly  stated,  the  herd  cost  of  milk  production  involves  not  only 
the  cost  of  producing  milk  but  also  the  cost  of  replacing  the  depleted 
cow  stock.  Usually  the  appreciation  in  the  young  stock  raised  more 
than  counterbalances  the  depreciation  of  the  milking  herd.  Before 
the  tuberculin  law  went  into  effect  the  majority  of  the  milking  cows 
in  the  dairy  district  tributary  to  Chicago  were  purchased  from  the 
creamery  and  cheese-factory  districts  of  Illinois  and  Wisconsin,  and 
at  that  time  the  amount  of  young  stock  raised  in  the  whole-milk  areas 
did  not  counterbalance  the  depreciation  of  the  milch  cows. 

Specifically,  the  herd  cost  of  milk  production  is  the  expense  of 
feed,  pasture,  man  labor,  the  interest  on  stock,  the  use  of  buildings, 
horse  labor,  miscellaneous  expenses,  and  the  use  of  equipment ;  minus 
the  returns  not  milk,  such  as  the  appreciation  of  stock,  manure,  etc. 

The  feed  includes  purchased  and  farm-raised  feeds.  In  the  pres- 
ent study,  the  purchased  feeds  are  charged  to  the  herd  at  the  purchase 
price  and  the  farm-raised  feeds  at  the  prevailing  values  on  the  farm ; 
that  is,  the  market  price  less  the  cost  of  transporting  them  to  the  mar- 
ket. Pasture  is  charged  at  prevailing  rates  at  which  pastures  were 
rented  in  that  district. 

Man  labor  involves  the  labor  of  milking  and  caring  for  the  stock. 

Interest  on  the  inventory  value  of  the  stock  is  charged  at  5  percent. 

T~ke  use  of  buildings  is  figured  at  8  to  10  percent  of  the  value  of 
the  structure. 

Horse  labor  is  the  amount  of  labor  necessary  to  haul  the  milk  and 
feed  and  is  charged  at  the  actual  cost  per  hour  of  horse  labor  on  the 
farms. 

Miscellaneous  expenses  include  veterinary  fees,  bull  service,  cow- 
testing  fees,  acid,  registration  fees,  and  membership  in  various  or- 
ganizations of  breeders  or  milk  producers. 

The  use  of  equipment  includes  the  repairs  and  depreciation  of  the 
dairy  equipment. 

Appreciation  of  live  stock  includes  the  net  increase  in  the  amount 
and  value  of  the  stock. 

Manure  hauled  on  the  land  is  credited  to  the  cows  at  $1  per  load. 


1919]  THE  SEASONAL  COST  OF  MILK  PRODUCTION  5 

Miscellaneous  credit  includes  credit  for  grain  sacks,  cow  hides,  and 
bull  service.1 

The  final  result  obtained  in  attempting  to  ascertain  the  monthly 
cost  of  milk  production  is  possibly  subject  to  some  criticisms  owing 
to  the  method  of  prorating  certain  factors  of  expense  and  return  for 
each  month  of  the  year.  It  is  at  present  not  possible  to  allot  to  each 
month  the  proper  woar  and  tear  on  dairy  equipment.  The  same  may 
be  said  of  the  use  of  buildings,  the  use  of  the  water  system,  the  de- 
preciation on  cows,  and  miscellaneous  expenses.  In  the  present  study 
these  expenses  have  been  prorated  according  to  the  volume  of  milk 
produced.  As  the  investment  in  live  stock  was  fairly  uniform  thru- 
out  the  year,  the  interest  on  the  stock  has  been  prorated  equally 
among  the  twelve  months.  The  manure  has  been  prorated  according 
to  the  actual  amount  recovered  each  month  and  hauled  on  the  land. 
The  appreciation  in  stock  has  been  prorated  according  to  the  volume 
of  milk  produced. 

The  greatest  discrepancy  in  prorating  expenses,  either  by  the 
month  or  by  the  volume  of  milk,  takes  place  in  the  case  of  the  build- 
ing charge.  Dairy  barns  are  primarily  erected  for  the  care  of  cattle 
in  the  winter  months.  It  is  doubtful  whether  either  method  of  pro- 
rating the  charge  for  the  use  of  buildings  will  not  leave  too  large  a 
portion  of  the  expense  charged  to  the  milk  produced  in  the  summer 
months. 

However,  as  98  percent  of  the  net  yearly  herd  cost  of  producing 
milk  is  man  labor  and  feed  not  pasture,  some  inaccuracy  in  prorating 
these  minor  items  of  expense  and  return  makes  little  difference  in 
the  final  result. 

Table  1  shows  for  the  year  and  for  each  month  of  the  year  the 
detailed  items  of  expense  and  of  return  other  than  milk  involved  in 
the  production  of  the  milk  on  the  eighteen  farms  under  consideration. 

The  net  yearly  herd  cost  of  producing  the  2,733,735  pounds  of 
milk  was  $46,624.46.  The  cost  of  producing  1,572,343  pounds  of  milk 
in  the  winter  months  (November,  December,  January,  February, 
March,  and  April)  was  $31,541.17.  The  cost  of  producing  1,161,392 
pounds  of  milk  in  the  summer  months  was  $15,083.29. 

The  average  cost  of  producing  one  hundred  pounds  of  milk  was, 
for  the  year,  $1.71 ;  for  the  winter  six  months  it  was  $2.00,  and  for 
the  summer  six  months  it  was  $1.30.  The  monthly  cost  per  hundred- 
weight of  milk  varied  from  $  .94  in  June  to  $2.14  in  December. 

VARIATION  IN  FEED  EXPENSE 

By  inspection  of  Table  1  it  will  be  noted  that  the  item  of  expense 
in  which  occurred  the  greatest  monthly  variation  was  that  of  feed. 


'For  further  details  concerning  these  items  of  charge  and  credit,  see  Bulletin 
216,  previously  referred  to. 


BULLETIN  No.  224: 


[December, 


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8  BULLETIN  No.  224  [December, 


The  total  expense  for  feed  varied  from  $1,279.15  in  June  to 
in  January.  The  feed  expense  per  hundredweight  of  milk  varied 
from  $  .54  in  June  to  $1.89  in  November.1  For  the  winter  six  months 
the.  average  expense  per  hundredweight  of  milk  was  $1.72,  and  for 
the  summer  six  months,  $  .91. 

This  variation  in  feed  expense  is  due  to  the  varying  kinds  and 
quantities  of  feed  consumed  at  different  times  of  the  year.  Large 
amounts  of  grain,  hay,  and  silage  are  fed  during  the  winter  months, 
while  in  the  summer  months  the  cattle  derive  their  sustenance  largely 
from  pasture.  It  is  clear  that  pasture  is  the  important  factor  in  re- 
ducing the  cost  of  milk  production  in  the  summer  months.  In  June, 
when  little  or  no  silage,  hay,  or  grain  is  fed  in  addition  to  pasture, 
and  the  flow  has  materially  increased,  the  feed  cost  per  hundred- 
weight of  milk  is  very  low.  In  the  present  study  the  feed  expense  in 
the  winter  months  was  found  to  be  more  than  three  times  that  in 
the  month  of  June. 

VARIATION  IN  LABOR  EXPENSE 

Altho  the  labor  expense  for  the  various  months  of  the  year  ex- 
hibits important  variations,  these  variations  are  not  so  great  as  are 
those  for  feed. 

The  total  amount  of  labor  required  to  produce  the  2,733,735 
pounds  of  milk  was  valued  at  $11,240.83;  61  percent  of  which  was 
required  during  the  winter  months.  On  the  basis  of  one  hundred 
pounds  of  milk  produced,  the  winter  average  for  labor  was  43.9  cents 
and  the  summer  average  37.4  cents.  The  greatest  expense  for  labor 
was  in  December,  47  cents ;  and  the  lowest  was  in  June,  29.5  cents. 

The  greater  expense  for  labor  in  the  winter  months  is  due  to  the 
additional  labor  required  to  feed,  bed,  and  clean  out  the  stables.  In 
the  summer  months,  when  the  cows  are  on  pasture,  this  work  is  largely 
eliminated.  Altho  the  volume  of  milk  produced  during  the  winter 
months  is  somewhat  greater  than  that  produced  in  the  summer  months, 
it  is  not  enough  greater  to  make  up  for  the  additional  cost  of  labor. 

QUANTITIES  OF  FEED  AND  LABOR  PER  HUNDREDWEIGHT  OF  MILK 

In  Table  2  are  shown  the  amounts  of  feed  (except  pasture)  and 
man  labor  required  in  the  production  of  one  hundred  pounds  of  milk 
during  the  various  months  of  the  year.  It  will  be  noted  that  June 
and  July  are  the  months  in  which  the  cost  of  feed  and  labor  constitute 
the  lowest  proportion  of  the  total  net  cost  of  production. 


the  largest  total  feed  cost  prevails  in  January,  the  maximum  produc- 
tion under  barn  feeding  is  also  reached  in  that  month,  with  the  result  that  the 
feed  cost  per  hundredweight  of  milk  produced  is  lower  than  it  is  in  November, 
when  barn  feeding  prevails  but  production  under  these  conditions  is  at  the 
minimum. 


1919] 


THE  SEASONAL  COST  OF  MILK  PRODUCTION 


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10  BULLETIN  No.  224  [December, 

In  June,  when  the  cost  of  feed  and  labor  was  only  66.9  percent  of 
the  total  cost,  there  was  utilized  in  the  production  of  one  hundred 
pounds  of  milk,  1.87  hours  of  labor,  16.6  pounds  of  grain,  22.0  pounds 
of  hay,  4.2  pounds  of  other  forage,  and  62.6  pounds  of  succulent  feed. 
In  January,  when  the  cost  of  feed  and  labor  constituted  107.8  per- 
cent of  the  total  cost,  there  was  utilized  in  the  production  of  one 
hundred  pounds  of  milk,  2.76  hours  of  labor,  51.2  pounds  of  grain, 
75.1  pounds  of  hay,  70.0  pounds  of  dry  forage,  and  261.2  pounds  of 
succulent  feed.  In  June,  22.0  pounds  of  hay  and  in  July  11.1  pounds 
of  hay  were  fed  per  hundred  pounds  of  milk,  while  both  in  Novem- 
ber and  in  December  about  75  pounds  were  used,  and  in  January,  68 
pounds. 

If  we  except  October  from  the  summer  months,  we  find  that  three 
times  as  much  grain  and  hay  were  fed,  per  hundredweight  of  milk 
produced,  during  the  winter  months  as  during  the  summer  months. 
The  amount  of  labor  required  during  the  winter  months  was  35  per- 
cent greater,  as  an  average,  than  during  the  summer  months. 

USE  OF  THE  SEASONAL  HERD  COST  OF  MILK  PRODUCTION 

By  using  the  amounts  shown  in  Table  2  and  applying  to  them  the 
farm  values  for  a  given  season,  it  is  relatively  simple  to  secure  the 
approximate  cost  of  milk  production  for  any  month  or  season.  For 
instance,  assuming  the  following  values  for  feed  and  labor :  grain,  $55 
per  ton ;  silage,  $6  per  ton ;  hay,  $10  per  ton ;  dry  forage,  $6  per  ton ; 
and  man  labor,  25  cents  per  hour,  the  December  cost  would  be : 

Grain 51.2     Ibs.      @  $55  per  ton     =$1.41 

Silage    272.9    Ibs.      @  6  per  ton     =       .82 

Hay 76.1     Ibs.      @  10  per  ton     =       .38 

Other  roughage 70.5     Ibs.      @  6  per  ton     =       .21 

Man  labor   2.94  hours  @  25c  per  hour  =       .74 

Value  of  feed  and  labor $3.56 

Proportion  that  feed  and  labor  form  of  total 

net  cost  105.9  percent 

Net  herd  cost  of  milk  per  hundredweight $3.36 

If  the  same  values  are  applied  to  the  quantities  of  feed  and  labor 
for  June,  the  summer  six  months,  the  winter  six  months,  and  the 
year,  the  following  costs  are  secured :  June,  $1.85 ;  summer  months. 
$2.20 ;  winter  months,  $3.20 ;  and  year,  $2.76. 


1919]  THE  SEASONAL  COST  OF  MILK  PRODUCTION  11 


SIGNIFICANCE  OF  SEASONAL  VARIATIONS  IN  FEED  AND 

LABOR  EXPENSE 

In  the  past  due  significance  has  not  been  attached  to  the  role  that 
pasture  plays  in  dairy  farming.  The  most  popular  method  of  dis- 
pensing with  the  pasture  question  has  been  to  contrast  the  total 
amount  of  food  secured  from  an  acre  of  pasture  with  the  amount  se- 
cured from  an  acre  of  corn  silage  or  alfalfa.  However,  in  spite  of 
much  advice  to  the  contrary,  the  dairy  farmers  have  continued  to 
make  general  use  of  pasture  since  the  cheapest  food  for  the  summer 
months  is  obtained  in  this  way  and  the  farmer  is  enabled  to  reduce 
the  amount  of  labor  spent  on  the  herd.  As  the  months  favorable  to 
pasturing  stock  approximately  coincide  with  the  crop  season,  this 
reduction  in  the  amount  of  labor  spent  on  the  herd  enables  the  farmer 
to  spend  more  labor  on  the  crops. 

On  the  eighteen  farms  under  discussion,  the  man  labor  devoted  to 
the  production  of  milk  during  the  summer  months  totaled  27,632.5 
hours,  an  average  of  152  hours  per  day.  In  the  winter  months  it 
amounted  to  43,533.0  hours,  or  238  hours  per  day.  The  difference 
per  day  per  farm  between  summer  and  winter  was  4.8  hours. 

The  expense  for  feed  in  the  summer  months  is  much  less  than  in 
the  winter  months.  In  this  study,  in  the  month  of  June,  when  pas- 
tures are  best,  the  feed  expense  was  considerably  less  than  one-third 
the  average  for  the  winter  months  (Table  1) .  This  was  due  to  the  fact 
that  much  more  grain  was  fed  per  hundredweight  of  milk  in  the  winter 
months  than  in  the  summer  months  (Table  2). 

Pasture  is  a  crop  which  is  in  most  cases  planted,  grown,  and  har- 
vested without  much  assistance  from  the  farmer.  Dairy  farmers  pas- 
ture-feed in  the  summer,  rather  than  barn-feed,  because  they  usually 
have  in  permanent  blue  grass  some  land  which  cannot  be  tilled  with 
profit.  Pasture  reduces  the  amount  of  labor  spent  on  the  herd  and  per- 
mits more  time  to  be  spent  with  the  crops  during  a  period  when  the 
returns  secured  from  labor  spent  on  crops  are  relatively  large  com- 
pared with  returns  from  the  herd.  If  the  farmers  did  not  pasture 
their  stock  in  the  summer  and  yet  continued  in  the  dairy  business, 
barn-feeding  during  the  summer  months,  more  buildings  would  have 
to  be  maintained  to  house  the  additional  feed  necessary,  or  fewer  cows 
would  have  to  be  kept.  Farmers  without  pasture  who  embark  in  the 
dairy  business  and  sell  to  the  ordinary  markets  have  one  of  two  al- 
ternatives ;  either  they  must  barn-feed  in  the  summer,  or  they  must 
turn  good  crop  land  into  pasture.  The  first  alternative,  in  the  ab- 
sence of  a  large  amount  of  unpaid  labor,  is  very  unprofitable.  The 
latter,  altho  unprofitable,  is  probably  less  so  than  the  former. 


12  BULLETIN  No.  224  [December, 

•Competition  has  inevitably  driven  extensive  dairy  farming  to  the 
cooler,  pasture  regions.  Dairying  will  not  become  extensive  in  non- 
pasture  regions  until  labor  becomes  relatively  cheap. 

COW  COST  OF  MILK  PRODUCTION  BY  MONTHS 

The  cow  cost  of  milk  production  involves  only  the  maintenance  of 
the  bulls  and  the  milking  stock ;  the  cost  of  rearing  the  young  stock 
is  not  included.  The  milking  herds  are  maintained  by  purchasing 
cows  or  by  replacing  depleted  stock  with  heifers  raised  in  the  herd. 

The  data  presented  in  Table  3  involve  407  cows  and  19  bulls,  the 
cows  producing  2,806,277  pounds  of  milk  at  a  net  cost  of  $48,479.67, 
or  $1.73  per  hundredweight.  It  will  be  noted  that  the  net  winter 
cost  of  producing  this  milk  was  $31,669.94,  or  $1.98  per  hundred- 
weight, and  the  summer  cost,  $16,809.73,  or  $1.40  per  hundredweight. 
The  monthly  cost  varied  from  $1.15  per  hundredweight  in  June  to 
$2.08  in  December  and  February. 

VARIATION  IN  FEED  EXPENSE 

For  the  herds  under  consideration  the  feed  expense  per  hundred- 
weight of  milk  produced,  varied  from  40.1  cents  in  June  to  $1.4*1,  or 
over  three  times  as  much,  in  December,  with  an  average  of  $1.05  for 
the  year.  For  the  winter  months  the  feed  expense  aggregated  $21,- 
307.29,  or  $1.33  per  hundredweight  of  milk,  and  for  the  summer 
months,  $8,159.56,  or  $.68  per  hundredweight  of  milk. 

As  explained  on  page  11,  pasture  is  responsible  for  the  great  re- 
duction in  feed  expense  during  the  summer  months. 

VARIATION  IN  LABOR  EXPENSE 

The  expense  of  man  labor  per  hundredweight  of  milk  produced, 
varied  from  27.9  cents  in  June  to  41.0  cents  in  December,  with  an 
average  of  36.3  cents  for  the  year.  During  the  winter  six  months 
an  average  of  11.7  hours  per  day  of  man  labor  was  spent  on  each 
herd,  while  in  the  summer  months  an  average  of  only  7.9  hours  per 
day  was  used. 

While  the  variations  exhibited  in  the  labor  expense  are  not  so 
great  as  those  shown  in  feed  expense,  they  are  still  great  enough  to 
contribute  materially  to  the  large  variation  in  the  total  cost  of 
production. 

QUANTITIES  OF  FEED  AND  LABOR  PER  HUNDREDWEIGHT  OF  MILK 

By  an  inspection  of  Table  4  it  will  be  noted  that  with  the  cow 
as  the  unit  of  computation,  the  value  of  the  man  labor,  grain,  hay,  dry 


THE  SEASONAL  COST  OF  MILK  PRODUCTION 


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1919]  THE  SEASONAL  COST  OF  MILK  PRODUCTION  15 

forage,  and  succulent  feeds  represents  77.8  percent  of  the  net  yearly 
cost  of  producing  the  milk.  The  percentage  which  feed  and  labor 
constituted  varied  from  47.3  in  June  to  88.1  in  January. 

The  a'mount  of  labor  per  hundred  pounds  of  milk  varied  from  1.76 
hours  in  June  to  2.69  hours  in  September,  averaging  2.29  hours  for 
the  year.  The  grain  fed  per  hundred  pounds  of  milk  varied  from 
13.7  pounds  in  June  to  51.6  pounds  in  February,  averaging  o2.4 
pounds  for  the  year. 

The  amounts  of  feed  and  hours  of  labor,  and  the  percentage  which 
the  total  value  of  these  forms  of  the  net  cost,  being  determined,  it  is 
relatively  simple  to  determine  the  approximate  cost  of  milk  produc- 
tion for  any  given  period.  The  costs  being  expressed  in  commodities 
may  be  converted  into  terms  of  value  by  applying  farm  prices  to 
these  units.  Assuming  that  the  prices  given  on  page  10  prevail,  the 
June  cost  would  be : 

Grain 13.70  Ibs.  @  $55  per  ton  =  $.377 

Silage : 49.90  Ibs.  @  6  per  ton  —  .150 

Hay 1.70  Ibs.  @  10  per  ton  —  .009 

Other  roughage 29  Ibs.  @  6  per  ton  =  .001 

Man  labor    1.76  hours  @  25c  per  hour  —  .440 


Value   of  feed   and   labor $.977 

Proportion  that  feed  and  labor   form  of  total 

net  cost    47.3  percent 

Net  cow  cost  of  milk  per  hundredweight $2.07 

Figured  in  a  similar  manner,  the  December  cost  would  be  $3.30 
per  hundredweight  of  milk ;  the  summer  cost,  $2.34 ;  the  winter  cost, 
$3.19 ;  and  the  year  cost,  $2.81. 


16  BULLETIN  No.  224  [December, 

SEASONAL  VARIATION  IN  COST  OF  PRODUCTION  AND 
THE  PRICE  OF  MILK 

The  price  of  a  commodity  must  in  the  long  run  cover  the  cost  of 
production  or  production  will  be  diminished.  Milk  is  no  exception 
to  this  rule.  Furthermore,  the  price  of  a  commodity  like  milk  for 
urban  consumption,  which  is  both  bulky  and  perishable,  must  fluctu- 
ate approximately  with  the  cost  of  production  or  production  will  be 
concentrated  in  the  more  profitable  seasons.  The  accompanying  figure 
presents  graphically  the  monthly  percentage  variation  in  the  price 
paid  for  milk  at  the  Chicago  market  during  the  ten  years  1907  to 
19161  and  in  the  cost  of  production  both  with  the  herd  as  the  unit 
and  with  the  cow  as  the  unit. 

These  curves  indicate  that  in  general  the  monthly  variation  in  the 
price  of  milk  has  followed  more  or  less  closely  the  monthly  variation 
in  the  cost  of  production.  The  price  of  milk  tends  to  vary  somewhat 
less  than  either  the  herd  cost  or  the  cow  cost  of  production,  not  rising 
so  high  in  the  winter  nor  falling  so  low  in  the  summer.  Taking  the 
yearly  herd  cost  as  the  basis,  the  monthly  herd  cost  per  hundred- 
weight of  milk  varies  from  127  percent  in  February  to  55  percent  in 
June.  Similarly,  the  monthly  cow  cost  per  hundredweight  of  milk 
varies  from  122  percent  in  February  and  December  to  67  percent  in 
June.  The  price  of  milk^  varies  from  120.3  percent  in  December  to 
70.6  percent  in  June. 

In  the  past  many  persons  have  recommended  a  flat  price  for  milk 
thruout  the  year.  This  recommendation  has  usually  been  made  in  the 
absence  of  due  appreciation  of  the  wide  variation  in  the  monthly  cost 
of  production.  A  flat  yearly  price  for  milk  is  out  of  the  question,  as 
production  would  tend  to  concentrate  in  the  summer  months  of  low 
cost.  This  would  result  in  a  supply  in  the  winter  season  that  would 
not  be  sufficient  to  meet  the  demand. 

Other  persons,  admitting  that  a  flat  yearly  price  is  not  practical, 
have  suggested  that  prices  should  be  on  the  basis  of  two  six-month 
periods,  with  the  price  for  the  winter  months  higher  than  that  for 
the  summer  months.  This  scheme  has  many  advantages  over  the  plan 
of  a  flat  yearly  price,  but  it  would  still  be  impossible  to  set  a  price 
that  would  encourage  a  fairly  constant  volume  of  milk  thruout  the 
period,  because  the  fluctuation  in  the  cost  of  production  is  so  great 
from,  month  to  month.  For  instance,  April  is  a  month  during  which 
a  large  volume  of  milk  is  produced  at  a  cost  considerably  greater  than 
that  for  the  summer  months,  but  yet  somewhat  lower  than  that 
for  the  winter  months.  April  being  between  the  two  seasons  of  high 
and  low  prices,  is  the  month  during  which,  even  under  the  present 


-For  tabular  presentation,  sec  page  356  of  Bulletin  216. 


1919] 


THE  SEASONAL  COST  OF  MILK  PRODUCTION 


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MONTHLY  VARIATION  IN  PRICE  OF  MILK  AND  IN  COST  OF  PRODUCTION 

scheme  of  monthly  adjustment,  the  farmer  producing  winter  milk 
probably  suffers  most.  Under  a  six-month  scheme  the  price  of  April 
milk  would  have  to  be  either  as  low  as  the  summer  price  or  else  as 
high  as  the  winter  price.  The  former  would  be  a  handicap  to  the 
producer  and  the  latter  a  burden  to  the  buyer. 

Again,  it  would  not  be  satisfactory  to  sell  milk  in  June,  when  there 
is  usually  a  surplus,  at  the  same  price  as  in  August  and  September, 
when  there  is  usually  a  scarcity,  altho  these  months  occur  in  what  are 
known  as  the  summer  months.  Similar  discrepancies  could  be  pointed 
out  for  the  winter  months. 

Owing  to  the  great  variation  in  the  monthly  cost  of  milk  produc- 
tion, a  flat  price  for  any  extended  period  would  probably  shift  pro- 
duction to  the  more  profitable  months.  Since  milk  production  is  so 
sensitive  to  changes  in  prices,  the  milk  producer,  the  milk  distributor, 
and  the  milk  consumer  are  best  protected  thru  a  fluctuating  price, 
which  insures,  so  far  as  it  seems  now  possible,  a  fairly  constant  sup- 
ply of  milk.  If  the  price  of  milk  fluctuates  approximately  with  the 
cost  of  production,  the  distributor 's  supply  is  automatically  regulated, 
the  milk  producer's  market  is  protected,  and  the  consumer  is  assured 
of  a  normal  supply  of  milk  thruout  the  year. 


18  BULLETIN  No.  224  [December. 

CONCLUSIONS 

1.  The  present  study   confirms  the  opinion  held  among  dairy 
farmers  of  the  great  importance  of  pasture  in  milk  production.    The 
feed  expense  in  the  summer  months  in  which  pastures  are  good,  is 
occasionally  only  one-fourth  of  that  in  certain  winter  months  when 
large  amounts  of  farm-raised  and  purchased  feeds  are  fed. 

2.  The  amount  of  man  labor  involved  in  the  production  of  milk 
is  considerably  less  in  the  summer  months  than  in  the  winter  months. 
This  is  true  whether  based  upon  the  total  amount  of  labor  used  on 
the  herd  or  whether  based  upon  the  amount  involved  in  the  produc- 
tion of  one  hundred  pounds  of  milk.      Proper  significance  of  this 
reduction  in  labor  is  appreciated  only  when  attention  is  drawn  to  the 
fact  that  these  savings  in  labor  occur  during  the  pasture  season,  Avhich 
coincides  with  the  crop  season,  when  the  maximum  labor  is  needed 
in  the  field. 

3.  Aside  from  man  labor,  feed,  and  horse  labor,  the  expenses  of 
producing  milk  are  more  or  less  constant  thruout  the  year.     When 
all  expenses  are  included,  the  net  cost  of  producing  one  hundred 
pounds  of  milk  in  June  is  about  60  percent  of  the  year  cost,  and 
in  December  about  120  percent. 

4.  With  a  fluctuating  seasonal  cost,  it  is  to  be  expected  that 
farmers  will  tend  to  concentrate  production  in  the  more  profitable 
months.     As  the  urban  trade  demands  a  constant  supply  of  milk 
thruout  the  year,  the  price  of  milk  must  fluctuate  approximately  with 
the  cost  of  production  in  order  to  prevent  an  extreme  shortage  at  one 
time  and  a  large  surplus  at  another.     In  other  words,  a  properly 
adjusted  fluctuating  price  for  milk  thruout  the  year  protects  the 
farmer's  market  and  the  distributor's  and  consumer's  supply. 


•\UlU 


L 


UNIVERSITY  OF  ILLINOIS-URBANA 


